Analyze This

Before taking a swing at his business plan last year, David Dayton took a SWOT. The co-founder and CEO of AlumiPlate Inc., a 14-person Minneapolis metal-coating company, used the time-tested management tool called Strength-Weakness-Opportunity-Threat analysis to not only identify his strengths and weaknesses, but to pinpoint potential pitfalls and prospects as well.

"We took all the things we know about our business and listed them in four columns labeled strengths, weaknesses, opportunities and threats," explains the 44-year-old entrepreneur. This brief exercise, done as part of the 4-year-old company's annual strategic planning process, highlighted a handful of areas for AlumniPlate to focus on in the coming year. Specifically, Dayton identified a high barrier to competition as a strength, while the company's proprietary aluminum coating technology is its best opportunity. Lack of a high-volume production demonstration was one weakness that was revealed, and heavy demands on key personnel were shown to pose the biggest threat.

Countless other entrepreneurs have used SWOT analysis to recognize and organize crucial factors determining their companies' success or failure, says Eileen Shapiro, president of management consulting firm The Hillcrest Group Inc. in Cambridge, Massachusetts, and author of The Seven Deadly Sins of Business (Capstone). SWOT analyses are easy and intuitive, and can be done quickly. Perhaps most significant, the technique helps harried entrepreneurs avoid missing important connections in complex situations. "A SWOT analysis," Shapiro says, "gives you the framework to make sure you're being thorough."

Mark Henricks is an Austin, Texas, writer who specializes in business topics and has written for Entrepreneur for nine years.

This article was originally published in the June 1999 print edition of Entrepreneur with the headline: Analyze This.